All last year, and into this year, Middleby (NASDAQ:MIDD) has never failed to beat consensus analyst estimates. Will this near seven-bagger, the pride and joy of the of the Motley Fool Hidden Gems small-cap investing newsletter, continue its winning streak when it reports its Q2 2007 numbers tomorrow afternoon?

What analysts say:

  • Buy, sell, or waffle? Only a half-dozen analysts follow Middleby, with buys outnumbering holds 5 to 1.
  • Revenue. On average, analysts expect to see 10% sales growth tomorrow, to $115.7 million.
  • Earnings. Profits are predicted to rise 6% to $0.71 per share.

What management says:
Apropos of a company whose stock-in-trade helps people prepare food to eat, Middleby has been on a consumption binge of its own lately. The firm announced the consummation of two purchases in July, and a third just last week. In reverse order, here's what Middleby just done 'et:

  • Oven and fryer maker Wells Bloomfield, a sub-subsidiary of United Technologies (NYSE:UTX), got snapped up for $29 million cash. Middleby's new prize brings with it $50 million in annual revenue.
  • Batter, breading, and mixing equipment-maker MP Equipment was devoured for an undisclosed sum. MP had $20 million in revenue last year.
  • Heated cabinetmaker Carter Hoffmann, yet another sub-subsidiary of United Technologies, went for $16 million, to capture $20 million in annual revenue.

If we assume that MP's purchase price was not announced because it wasn't "material," and that materiality starts nowhere south of the $16 million price tag attached to Carter Hoffmann, then in all, it looks like Middleby paid no more than $60 million to capture about $90 million in revenue, or less than 0.7 times sales. Considering that Middleby's own stock fetches 2.5 times sales, these purchases can collectively be best described as a steal.

What management does:
Of course, the key will be for Middleby to bring its new acquisitions' profit margins up to match that derived from its own core revenue. Judging from its past performance as reflected below, I don't think management will have much trouble with that. While still short of 20%, Middleby's operating margin is already higher than that of rival Illinois Tool Works (NYSE:ITW), and infinitely better than the negative operating margin that TurboChef (NASDAQ:OVEN) "earns."





























All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
Updating Hidden Gems members on the progress of his standout investment, Fool co-founder Tom Gardner confided in June that Middleby "CEO Selim Bassoul remains one of [Tom's] favorite corporate leaders."

On the question of whether Bassoul will be able to extract profits from its three new businesses, described above, I think you'll find Tom's following comment instructive: "Over the past six months, [Bassoul] has ... acquired two companies, Jade Products and MP Equipment, continuing its tradition of buying strong niche companies and growing them through Middleby's excellent distribution network. Owner earnings [are growing at] a higher growth rate than I previously estimated."

In sum, Tom is optimistic. But would he buy today? Find the answer to that question, and the stock price that would convince Tom to back up the truck for a full load of Middleby stock, in the July update -- freely available to any Fool who signs up for a free 30-day trial of the service.

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Fool contributor Rich Smith does not own shares of any company named above. If I do say so myself, The Motley Fool's disclosure policy is well done.